Turning oil palm land into an airport city

KUALA LUMPUR: Malaysia Airports Holdings Bhd (MAHB) plans to convert some oil palm plantations surrounding Kuala Lumpur’s main air terminal into attractions such as theme parks, concert halls and golf courses to lure businesses and visitors.

A factory outlet venture with Mitsui Fudosan Co Ltd, Japan’s biggest developer, will open in the area next year, and new towns have sprung up near the airport that will help the zone dubbed KLIA Aeropolis grow, MAHB chief financial officer Faizal Mansor said in an interview on Tuesday.

MAHB has about 22,000 acres (8,903 ha) of land in Sepang, where the international airport and a Formula One track are located.

“I don’t think any other airport in the world has got the kind of landbank that we have,” Faizal said. As the area gets more developed, “the airport then slowly becomes less and less a destination for passengers to take a flight, more and more a destination by itself.”

Malaysia competes with neighbours including Singapore and Thailand for tourism and foreign direct investment. The country opened the world’s largest terminal for low-cost carriers last month to tap rising air travel among Asian consumers.

AirAsia Bhd, which has grown into the region’s biggest budget airline in the past decade, has contributed to a doubling in visitors to Malaysia in that period.

The country had 25.7 million visitors and collected RM65.4 billion in tourism receipts last year, according to Tourism Malaysia. The government targets 36 million tourists a year and RM168 billion in receipts by 2020.

Arrivals this year have been dented by the disappearance of a Malaysian Airline System Bhd (MAS) jet three months ago (March 8) during a flight from Kuala Lumpur to Beijing. Tourists from China, the country’s third-largest source of visitors, cancelled their trips while travel agents there boycotted the airline.

MAS’ bookings from China dropped 50% to 60% after Flight MH370, carrying mostly Chinese passengers, vanished, Hugh Dunleavy, the airline’s director of commercial operations, said last month.

The national carrier is speeding up an overhaul of its business as the missing airplane places additional stress on its operations that have lost a total RM4.57 billion since the start of 2011. MAS will review all routes, it said.

Shares of MAHB have fallen about 15% this year, after surging 73% in 2013. The benchmark FBM KLCI has climbed 0.5% in 2014.

The stock’s decline has partly been due to investor concern amid speculation of a possible MAS bankruptcy, Faizal said. Bankruptcy for the carrier is not an “option at this stage,” according to Dunleavy.

Future developments for KLIA Aeropolis include more than 300 acres set aside for a cargo and logistics park, more than 500 acres for a theme park and land exceeding 100 acres for offices, according to presentation slides from the company.

MAHB plans to develop the old budget terminal site into a logistics hub for cargo facilities once main tenant AirAsia relocates its headquarters, Faizal said.  — Bloomberg

This article first appeared in The Edge Financial Daily, on June 13, 2014.


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